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Laurent v. PricewaterhouseCoopers LLP

United States Court of Appeals, Second Circuit

July 23, 2015

TIMOTHY D. LAURENT, SMEETA SHARON, Plaintiffs-Appellees, MICHAEL A. WEIL, Plaintiff,
v.
PRICEWATERHOUSECOOPERS LLP, THE RETIREMENT BENEFIT ACCUMULATION PLAN FOR EMPLOYEES OF PRICEWATERHOUSECOOPERS LLP, THE ADMINISTRATIVE COMMITTEE TO THE RETIREMENT BENEFIT ACCUMULATION PLAN FOR EMPLOYEES OF PRICEWATERHOUSECOOPERS LLP, Defendants-Appellants. [*]

Argued April 14, 2015

Former employees of PricewaterhouseCoopers LLP sued the company and its retirement plan, alleging that the plan violated the Employee Retirement Income Security Act of 1974 (" ERISA" ). The plan defines " normal retirement age" as five years of service, so that it coincides with the time at which employees vest in the plan. Plaintiffs allege that this scheme deprives plan participants of so-called " whipsaw payments," which guarantee that participants who take distributions in the form of a lump sum when they terminate employment will receive the actuarial equivalent of the value of their accounts at retirement. The district court (J. Paul Oetken, Judge) denied defendants' motion to dismiss, holding that the PricewaterhouseCoopers plan violated ERISA because (1) five years of service is not an " age" under ERISA, (2) the plan violated ERISA's anti-backloading rules, and (3) the plan's documents violated ERISA's notice requirements. We agree that the plan violates ERISA, but for different reasons than those cited by the district court. We hold that the plan's definition of " normal retirement age" as five years of service violates the statute not because five years of service is not an " age," but because it bears no plausible relation to " normal retirement." We therefore AFFIRM, without reaching the district court's alternative reasons for denying defendants' motion to dismiss.

DANIEL J. THOMASCH, Gibson, Dunn & Crutcher LLP, New York, N.Y. (Richard W. Mark, Amer S. Ahmed, Gibson, Dunn & Crutcher LLP, New York, NY; Robert J. Kopecky, Kirkland & Ellis LLP, Chicago, IL, on the brief), for defendants-appellants.

JULIA PENNY CLARK, Bredhoff & Kaiser, PLLC, Washington, DC (Eli Gottesdiener, Gottesdiener Law Firm, PLLC, Brooklyn, NY, on the brief), for plaintiffs-appellees.

Before: CABRANES, LYNCH, and DRONEY, Circuit Judges.

OPINION

Page 273

Gerard E. Lynch, Circuit Judge :

The Employee Retirement Income Security Act of 1974 (" ERISA" ), as amended 29 U.S.C. § 1001 et seq., protects retirement benefits that have accrued over the course of an employee's tenure until that employee reaches normal retirement age. The question in this case is how much leeway retirement plan sponsors have to define what " normal retirement age" is, in order to avoid paying future interest credits when the employee leaves employment and elects 3 to receive the value of his or her retirement account in a lump-sum distribution. Plaintiffs, former employees of PricewaterhouseCoopers LLP (" PwC" ), sued the company and its retirement plan, alleging that the plan violated ERISA. The plan defines " normal retirement age" as five years of service, so that it coincides with the time at which employees vest in the plan. Plaintiffs allege that this scheme deprives them of so-called " whipsaw payments," which guarantee that plan participants who take distributions in the form of a lump sum when they terminate employment will receive the actuarial equivalent of the value of their accounts at retirement.

Defendants moved to dismiss the complaint. The district court (J. Paul Oetken, Judge ) denied the motion to dismiss, holding that the PwC plan violated ERISA because (1) five years of service is not an " age" under ERISA, (2) the plan violated ERISA's anti-backloading rules, and (3) the plan's documents violated ERISA's notice requirements. It then certified its decision for interlocutory review, and we accepted the certification. We agree that the plan violates ERISA, but for different reasons than those cited by the district court.[1] We hold that the plan's definition of " normal retirement age" as five years of service violates the statute not because five years of service is not an " age," but because it bears no plausible relation to " normal retirement," and is therefore inconsistent with the plain meaning of the statute. We accordingly AFFIRM, without reaching the district court's alternative reasons for denying defendants' motion to dismiss.

BACKGROUND

Before discussing plaintiffs' suit and the issues raised on appeal, it is necessary to provide some background on ERISA and how its minimum vesting provisions apply to the kind of plan that PwC offers its employees, in order to clarify the framework in which those issues must be analyzed.

I. ERISA's Vesting Requirements for Cash Balance Plans

Congress passed ERISA in response to findings that inadequate vesting protections in private retirement plans were causing retirees to lose their anticipated benefits. See 29 U.S.C. § 1001(a). The statute addresses that problem largely by imposing various requirements on plans as a condition for receiving preferential tax treatment. ERISA recognizes two basic types of retirement plans: defined contribution plans (also known as individual account plans) and defined benefit plans. A ...


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